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Who should pay for rebuilding the Shore?

The devastation caused by Hurricane Sandy will be felt by Shore residents for years if not decades. Nevertheless, the destruction at Shore communities will cause some residents to relocate and not try to rebuild their homes and businesses. Other residents will rebuild and hope that another “storm of the century” is just that, 100 years away.

The consequences of Sandy creates the opportunity for the people of New Jersey and the nation to have an adult, civil discussion about ocean front property, risk, insurance, and the role of government in land use.

Land can be owned by individuals, or a group of individuals for profit or nonprofit purposes. These would be examples of free market land use. Conversely, land could be “owned” by the federal government, a state or county government, or a city or municipality. Land “owned” by a government entity would be an example of socialism. Economic theory and practice reveals that socialism is the poorest allocator of any resource, especially land.

Under the centuries old Public Trust Doctrine, the people of New Jersey have the right to access the State’s beaches. In addition, “all levels of government, from federal to local, have the responsibility to preserve and protect the nation’s coast, ensuring adequate access to and use of tidal waterways and their shores to the public.” This assertion begs the question, who should own beachfront properties and how can access to the shore be established that respects private property rights?

Ideally, all beachfront property would be privately owned and the owners would determine the terms and use of the Shore just as they do as owners of single and multifamily homes, apartment buildings, shopping centers, etc. When it comes to beachfront property, however, the operating principles seem to be collectivism and egalitarianism. Under the Public Trust Doctrine, all levels of government are simply trustees for the land so the public’s access to the beach is secured. In other words, everyone has a “right” to access the beach.

The flaw in this model, the Public Trust Doctrine and federally subsidized flood insurance, has created the very conditions that led to massive destruction at the Shore. In other words, land collectivism and underpricing of flood insurance by the feds created the moral hazard of building on high risk land. And the storm of the century has exposed the inevitable consequences of land socialism.

Now the question is obvious: After the billions of dollars of damages to Shore communities, who should pay for rebuilding homes and business, repairing the infrastructure, replenishing the beaches, etc., must be addressed. Given the rules that were in place when people built or bought homes at the shore and opened businesses, the federal government through the National Flood Insurance Program, the state government, and local governments, should pony up the money to do what is necessary to make people whole. Taxes probably will have to rise at the state and local levels to pay to rebuild roads, bridges, etc.

However, there should be one caveat in providing funds from the feds, Trenton and local governments, a grand bargain if you will, future costs of rebuilding will be borne by the residents and businesses of the Shore communities and not taxpayers in other parts of the State and the nation. In short, we should rethink the Public Trust Doctrine, and eliminate the moral hazard of creating incentives for people to build on the highest risk land in the State.

One of the best ways to create a rational land use policy is for the Shore to be privatized so risk taking is no longer socialized. Auctioning off beach front property would make economic sense. Under a free enterprise land use model at the Shore, land owners would have “free access” to the beaches and charge for the amenities, restrooms, parking, umbrellas, etc. Another model would require a beach access fee. In other words, there would be a myriad of land use models that would be consistent with a our founding principles of free enterprise and limited government.

It is time we abolish socialized risk. The destruction at the Shore and the costs to taxpayers prove once again that collectivism carries a high price tag for the public.